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5/05/08 Stock Split Report Update
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Stock Split Report Subscribers:
MARKET ALERTS
Targets hit alerts: None issued
Buy alerts: ACI; BIDU; CELG; CRM; RIG
Trailing stops: None issued
Stop alerts issued: None issued
The market alert service is a premium level service where we issue intraday alerts relating to the general market conditions, when stocks hit action points (buy, stop, target, etc.), and when we see other information impacting the market or our stocks. To subscribe to the SSR alert service you can sign up at the following link:
http://www.investmenthouse.com/alertssr.html
SUMMARY:
- Lower volume test for second day as MSFT abandons YHOO, dollar falls, oil & copper hit new highs.
- Services sector jumps back to expansion: further indicia economy bottoming?
- Commodities continue to rise even as dollar holds flat.
- Waiting out this pullback.
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NOTE: Jon Johnson is under the weather this evening so the market summary is truncated though he did email his take on the session.
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Stocks started softer as futures were lower on surging oil (120.08, +3.76) and some worry after MSFT officially dropped its offer for YHOO. Not the way investors wanted to wake up to a Monday, and stocks were down as a result.
It was the second day lower after the strong (at least on NASDAQ) Thursday move higher. Copper joined oil with a new all-time high; a year ago after copper pulled off of the then all-time high not many thought we would see this price again in a lifetime. They say technology and the internet compress time but this is ridiculous.
Stocks started lower but didn't stay there long. The market took a shot at rebounding within 15 minutes of the open. They turned positive as the energy and commodities stocks took point though even AAPL and RIMM were moving up for the techs. The ISM services report hit at 10ET and it not only topped expectations, but it also rose to 52.0, pushing it back into expansion. That jibes with the jobs report that saw the service sector ramp up employees. It was also the first rise in four months, and combined with the flattening of the downside in the national and regional manufacturing reports, factory orders, etc. that picked up investor spirits.
Didn't take long before that move was tested. It was tested, tested again into lunch, then tested again to start the afternoon session. That means the indices when lower, then further, and made another leg lower into the afternoon. A modest hold and bounce over the pat two hours closed stocks off the low, but that is about all it did as they could not turn positive.
Investors are looking at the dollar, oil, and commodities and their action the past few session since the FOMC announcement, trying to decide if this is just a relief move in commodities or some decoupling of the dollar/commodities trade. It appears to be the latter as commodities moved up on some volume Monday even as the dollar, while not up, was basically flat. While a rising dollar will impact the price of goods priced in dollars just as a falling dollar does, with China, India, Indonesia, Viet Nam, etc. all in the game, demand is simply outstripping supply.
Thus we still think that growth stocks will rebound after this 2-day pullback following the solid Thursday NASDAQ break higher. Oil at $120/bbl seems to be an insurmountable roadblock. Still, the market keeps acting positively and the economic data keeps hinting that things are getting better. Common sense tells you this bounce is likely just some kind of interim rally after a 5 month selloff that will test lower once more when the bids dry up. Without any distribution in the indices and plenty of leadership across many sectors, however, this rally still looks to have life in it and we are looking for a rebound to continue the move after this test of the Thursday break higher.
TECHNICAL. Low to high to low action; it was not the market's best day of the past week, but it was not bad at all as there was no technical damage. It was just trying to figure out what this dollar/commodity relationship is going to be.
INTERNALS: Modestly lower breadth (-1.3:1 NYSE, NASDAQ) and lower trade indicate nothing serious to the downside on Monday, just some pensive investors and thus bids dried up. The overall market faded as a result. The overall market; there were many stocks moving higher.
CHARTS: As noted, no technical damage noted on the charts. Volume was lower as the indices pulled back from last week's Thursday break higher. DJ30 faded back from the 200 day SMA, but that was pretty much forgone after the Friday action that saw it surge through that level only to give it up on the close. NASDAQ faded from resistance at 2500 on lower trade, still in excellent shape. SP500 did the same, fading back from a tap at the long term trendline on Friday.
LEADERSHIP: As noted AAPL and RIMM were up again, joined by GOOG and BIDU, but most tech stocks were not up on the session. Commodities stocks were the biggest winners as a group but they were not the only ones. Interestingly, energy stocks were quite mixed even with surging oil prices and a flat dollar. Are they becoming decoupled from the price of oil? A bit too early to say that, but the rising dollar certainly didn't slow oil or those stocks down last week. Tech many other areas still look solid, and this little pullback is setting them up again to help NASDAQ and the NYSE indices take on resistance once more.
THE MARKET
MARKET SENTIMENT
Now that the Fed has entered the game with its credit facilities that actually work, the correlation with VIX that set up during the correction is broken. Volatility and hence VIX can decline and hold at low levels for a very long time and have no bearing on any continued rally.
VIX: 18.9; +0.72
VXN: 22.43; +1.04
VXO: 18.38; +0.15
Put/Call Ratio (CBOE): 0.9; 0
Bulls versus Bears:
This is a reading of the number of bullish investment advisors versus bearish advisors. The reason you look at this is that it gives you an idea of how bullish investors are. If they are too bullish then everyone is in the market and it is heading for a top: if everyone wants to be in the market then all the money is in and there is no more new cash to drive it higher. On the other side of the spectrum if there are a lot of bears then there is a lot of cash on the sideline, and as the market rallies it drags that cash in as the bears give in. That cash provides the market the fuel to move higher. If bears are low it is the same as a lot of bulls: everyone is in and the market doesn't have the cash to drive it higher.
Bulls: 40.9%. The rally is having its impact, pushing bulls higher, up from 39.1% last week and 37.8% where it held for a few weeks. Crossed back above bears last week, the usual positioning of the two. Fell to 30.9% in mid-March as the low. The indicator did its job with the dive below 35% and the crossover with the bears. The bulls and bears were eye to eye in mid-February and have crossed. A move into the lower 40's is a decline of significance. A move to 35% is a bullish indicator. This is smashing that. For reference it bottomed in the summer 2006, the last major round of selling ahead of this 2007 top, near 36%, and 35% is considered bullish.
Bears: 31.8%. Bears are tailing off quickly, down from 35.6% the prior week and 38.9% the week before. As with the bulls the jump in bears did its job after hitting 44.7% in the third week of March that was up from an already freakishly strong 43.3% the week before. That was a surge from an already high 36.6% the prior week. Up sharply from a low of 19.6% on the last rally. It is over 30% and indeed over 35% the prior week, meaning it has blown past the range that means business. Big move after falling to a low of 19.6% on this round. Bearishness peaked at 37.4% in September 2007. It topped the June 2006 peak (36%) on that run. That June peak eclipsed the March 2006 high (33%) and well above the 2005 highs that spawned new rallies (30% in May 2005, 29.2% in October 2005). This is a huge turn, unlike any seen in recent history.
NASDAQ
Stats: -12.87 points (-0.52%) to close at 2464.12
Volume: 2.106B (-7.34%)
Up Volume: 599.33M (-567.45M)
Down Volume: 1.482B (+402.108M)
A/D and Hi/Lo: Decliners led 1.3 to 1
Previous Session: Decliners led 1.31 to 1
New Highs: 42 (+12)
New Lows: 78 (+29)
NASDAQ CHART: http://investmenthouse.com/ihmedia/NASDAQ.jpeg
NASDAQ 100 (-0.31%) is in excellent position. It surged through the 200 day SMA last Thursday on strong trade and is now testing the move, showing a doji Monday on lower trade just over the 200 day. It may take another session off, but this is a great setup to continue the break higher.
SP500/NYSE
Stats: -6.41 points (-0.45%) to close at 1407.49
NYSE Volume: 1.067B (-16.06%)
Up Volume: 452.141M (-291.407M)
Down Volume: 640.665M (+129.465M)
A/D and Hi/Lo: Decliners led 1.33 to 1
Previous Session: Advancers led 1.34 to 1
New Highs: 33 (+6)
New Lows: 13 (+2)
SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg
SP600 CHART: http://investmenthouse.com/ihmedia/SP600.jpeg
DJ30
Stats: -88.66 points (-0.68%) to close at 12969.54
Volume: 197M shares Monday versus 205M shares Friday.
DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg
TUESDAY
No economic data on Tuesday. Cisco announces earnings after the close. The market has seen some good earnings, seen some firming in economic data, has bounced, and is now pulling back. It needs another goose from the earnings side.
After that Thursday break higher on the new month money coming into the market, the past two days saw the indices fade. Not as many bids but no selling as the volume backed off. The big question is whether it is just a rest after a good move or if the market shot its last bullet on this rally. As they indices bumped into natural resistance (200 day SMA DJ30, trendline on SP500, price points on NASDAQ), a pullback is normal.
After another day or so of testing it will be lick log time, i.e. the rally has to continue on some volume with techs providing some leadership. They will need to; NYSE indices failed to show any real power on the last move and they need to do that or trouble is ahead. The market won't rise forever on light trade, though if it gets some leadership with volume in some key areas (e.g. technology) it can fake it for quite a while.
We are going to let the pullback run its course and keep a close eye on the volumes. Not a lot of breakdowns in individual stocks mimics the indices and still suggests that the pullback is on solid ground right now. Thus we continue to look for buys form solid stocks that are in position to move higher. A light volume pullback and money still moving into solid sectors and stocks indicates near term health, and we can continue to play that. Note we took some nice gain Friday on several positions that had run well; standard operating procedure. Monday we picked up quite a few positions as commodities stocks and some other areas bounced; again, if leadership leads you have to take that as your cue because the market typically follows. That is the LMLS method: Let the Leaders Lead Stupid.
Support and Resistance
NASDAQ: Closed at 2464.12
Resistance:
Some modest resistance at 2500 from interim August lows.
The 200 day SMA at 2522
2601 is an old trendline from summer 2004/summer 2005
Support:
2451 is the August closing low
The 10 day EMA at 2433
2419 is the January 2008 peak and the early February peak
2392 is the April 2008 peak
2386 is the August intraday low
2379 from the October 2006 peak
2378 is the mid-February peak
2370 from the April 2006 peak
The 50 day EMA at 2369
The 90 day SMA at 2363
2340 from the March 2007 low
2300 is the trendline from the summer 2004/July 2006 lows, Q4 2005 consolidation
2261 is late March higher low
2252 is the early February low
2221 is March low
2216 from August 2005 peak
2202 is the January intraday low
2175 from the December 2004 peak
2168 is the March 2008 low
S&P 500: Closed at 1407.49
Resistance:
1425 is a longer term trendline from the August 2003/September 2004 lows
1433 from a pair of August 2007 lows and December mid-month intraday low
The 200 day SMA at 1432
1446 from the December low
Support:
1406 is the August and November 2007 closing low
1396 is the February 2008 peak
1395 is the 10 day EMA
1387 is the April 2008 intraday high
The 90 day SMA at 1363
1374 is the March 2007 closing low
1370 is the August 2007 intraday low
The 50 day EMA at 1368
1330 is an ancient trendline
1325 from May 2006 peak prior to the summer 2006 correction
1317 is the early February low
1305 to 1302 from an August 2006 peak and matches a range of support from March and April 2006.
1294 from the January 2006 peak
1288 from June 2006
1280 from June and August 2006
1272.66 is the March 2008 low
Dow: Closed at 12,969.54
Resistance:
The 200 day SMA at 13,044
13,092 is the December 2007 intraday low
13,250 from price points in second half of 2007
13,563 is the late December peak
13,780 is the early December 2007 peak
Support:
The 10 day EMA at 12,882
12,845 is the August closing low
12,786 is the February 2007 peak
12,750 to 12,768 is the February 2008 peak and a series of lows and highs from August 2007
12,743 is the November low
The 50 day EMA at 12,618
12,573 is the mid-February high
The 90 day SMA at 12,517
12,518 is the August intraday low
12,250 from late March 2007 lows
12,070 from the early February 2008 lows
12,050 from the March 2007
11,731 is the March 2008 low
11,670 is the May 2006 intraday high; 11,642 closing
11,634 is the January intraday low
Economic Calendar
These are consensus expectations. Our expectations will vary and are discussed in the 'Economy' section.
May 5
ISM Services, April (10:00): 52.0 actual versus 49.1 expected, 49.6 prior
May 7
Preliminary Productivity, Q1 (8:30): 1.5% expected, 1.9% prior
Pending home sales, March (10:00): -1.0% expected, -1.9% prior
Crude oil inventories (10:30): 3.8M prior
Consumer Credit, March (3:00): $6.0B expected, $5.2B prior
May 8
Initial Jobless claims (8:30): 375K expected, 380K prior
Wholesale inventories, March (10:00): 0.5% expected, 1.1% prior
May 9
Trade balance, March (8:30): -$61.3B expected, -$62.3B prior
End part 1 of 3
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